NATIONAL REPORT APRIL 2016 Investor Pulse Poll 1 Executive Summary 3 Investing in the Future: Sustainable, Impact and Socially Responsible Investing 6 Methods 7 Contacts EXECUTIVE SUMMARY Morgan Stanley releases findings from the Morgan Stanley Investor Pulse Poll of 1,003 US high net worth (HNW) investors ages 25 to 75, as well as another 203 individuals ages 25 32, with $100,000 or more in investable household financial assets. Approximately one in four (23%) of all US households falls into this group, representing approximately 28 million households (defined to exclude assets held in real estate and employer retirement plans). 1 The poll includes interviews with hundreds of households that report investable household financial assets of $1 million or more (approximately 33% of those interviewed). It yields a robust look at a group that makes up only 3.8% of total US households. 2 All told, households with $100,000 or more in investable assets account for 95% of total investable assets by value. 3 All results reported are from the Morgan Stanley Investor Pulse Poll. 1 According to aggregated data using results of the Federal Reserve s 2013 Survey of Consumer Finances by CEB, 23% of all US households have non-retirement financial assets of $100,000 or more and are of age 25 to 75. 2 According to aggregated data using results of the Federal Reserve s 2013 Survey of Consumer Finances by CEB 3 According to aggregated data using results of the Federal Reserve s 2013 Survey of Consumer Finances by CEB 23% of all US households are high net worth investors 1 95% of total investable assets by value come from households that are high net worth investors 3
EXECUTIVE SUMMARY FORWARD-LOOKING INVESTMENTS Clean energy and health investments most apt to garner market-rate returns among HNW investors. Of the more forward-looking investments surveyed, those focused on clean energy () and on health and well-being () are seen to have the greatest chance of achieving market-rate returns in 2016 while pursuing positive change. At the other end of the spectrum are investments related to education access (43%), affordable housing (42%) and financial inclusion (). CHANCE OF ACHIEVING MARKET RETURNS WHILE PURSUING POSITIVE CHANGE IN 2016 FORWARD-LOOKING INVESTMENT STRATEGIES When it comes to more forward-looking investment strategies, HNW investors are most apt to be aware of socially responsible investing (42%). Fewer consider themselves wellversed in sustainable investing (30%) or impact investing (13%). However, when given brief descriptions of the concepts, HNW investors are receptive particularly to sustainable investing (55% express interest, and 32% feel it is a good prospect for 2016). These investment approaches hold even greater appeal to HNW Millennials, with roughly eight in 10 expressing interest in each. AWARENESS OF FORWARD-LOOKING INVESTMENTS 42% Are aware of socially responsible investing Focused on clean energy Focused on health and well-being 30% Are aware of sustainable investing 13% Are aware of impact investing SUSTAINABLE INVESTING 55% Express interest in sustainable investing 43% 42% Providing greater access to education Affordable housing and urban development Improving financial inclusion 32% Feel it s a good prospect for 2016 INTEREST IN INVESTMENT APPROACHES Roughly eight in 10 HNW Millennials expressed interest in each of the investment approaches FORWARD-LOOKING INVESTMENT STRATEGIES HNW investors are starting to take action: clean energy and health investments, as well as positive and negative screening, lead the way. Investing in clean energy funds is somewhat more popular than divesting from fossil fuels. Sizable shares of HNW investors report having taken, or plan to consider taking, a range of socially responsible and/or sustainable investment actions. Actions taken or considered in next three years. % Have done or are considering (net): 33% 29% 28% 25% Investing in clean energy funds Investing in healthcarebased funds Negative screening Positive screening Investing in funds that create positive change Divesting from fossil fuels Community investing Aligning investments with religious beliefs 2 MORGAN STANLEY 2016
Investing in the Future: Sustainable, Impact and Socially Responsible Investing Forward-Looking Investments HNW Millennials vs. HNW Investors Overall FAMILIARITY INTEREST GOOD INVESTMENT FOR 2016 Millennials Overall Millennials Overall Millennials Overall Socially responsible investing 66% 42% 82% 45% 54% 26% Sustainable investing 64% 30% 80% 55% 58% 32% Impact investing 59% 13% 78% 45% 51% 21% For Illustrative Purposes Only HNW INVESTORS RECEPTIVE TO SUSTAINABLE, IMPACT AND SOCIALLY RESPONSIBLE INVESTING EVEN IF NOT WELL-VERSED IN THEM PRESENTLY Asked about a series of forward-looking investment philosophies or approaches socially responsible, sustainable and impact investing fewer than half of HNW investors overall are familiar with each approach. Socially responsible investing by avoiding certain sectors or geographies is most well-known today, with 42% at least somewhat familiar on an unaided basis. Sustainable investing by seeking out investments that aim to achieve market-rate returns while, at the same time, making a social or environmental contribution follows, with 30% familiar. HNW investors are least familiar with the concept of impact investing, which also involves targeting investments aimed to help bring about positive social or environmental change (13%). Millionaires are more apt to be at least somewhat familiar with all three investment strategies (, 43% and 24%, respectively). HNW investors overall express some openness to each investment strategy after being provided with a brief description. 4 Sustainable investing is particularly well-received; 55% are at least somewhat, if not very, interested, and 32% rate it as a good investment for 2016. HNW investors are a bit more lukewarm towards impact and socially responsible investing, with 45% expressing interest in each and one in five or more viewing each as good. By wide margins, HNW Millennials are more likely to be familiar with, express interest in and see opportunities in the forward-looking investment strategies surveyed. Unlike HNW investors overall who are most apt to be familiar with socially responsible investing, but to see the most potential in sustainable investing HNW Millennials are fairly enthusiastic about all three approaches. CLEAN ENERGY AND HEALTH INVESTMENTS MOST APT TO GARNER MARKET-RATE RETURNS When it comes to anticipated returns for specific forward-looking investments, there are clear winners and losers in HNW investors minds. Investments focused on clean energy and health and well-being are seen to have the greatest chance of achieving market-rate returns in 2016 while pursuing positive social and/or environmental change each rated as at least somewhat, if not very, likely by of HNW investors. Investments geared towards goods and services for aging populations (65%), waste management (65%), food sustainability (63%) and water conservation (62%) are also seen to stand a good 4 Definitions provided: Socially responsible investing involves intentionally avoiding investments based on specific criteria (e.g., avoiding certain sectors such as tobacco, firearms, coal mining, or geographic regions, etc.). Sustainable investing involves proactively making investments in companies or funds that aim to achieve market-rate financial returns while also pursuing a positive social and/or environmental impact. Impact investing involves allocating to investment funds or financing private enterprises that intend to deliver specific positive social and/ or environmental impacts. 3 MORGAN STANLEY 2016
chance of garnering market-level returns. Millionaires are especially likely to see promise in investments focused on populations (78%). At the other end of the spectrum are investments related to education access (43%), affordable housing (42%) and financial inclusion (). Moreover, interest in forward-looking investments is somewhat tempered by the fact that most (65%) HNW investors perceive a trade-off between sustainability and financial gains. As seen with other types of investment vehicles and sectors, HNW Millennials tend to be more enthusiastic toward most of these forward-looking investments than are HNW investors overall. In fact, out of nine investment areas surveyed, HNW Millennials are more inclined to believe that seven of them will achieve market-rate financial returns while pursuing positive social and/or environmental change in 2016. HNW Millennials enthusiasm is most pronounced (relative to HNW investors overall) when it comes to investments supporting affordable housing (72%), greater access to education (71%) and financial inclusion (70%). Two in three HNW investors view sustainability and financial gains as a trade-off. Believe that the following investments are likely to achieve market-rate financial returns in 2016 Clean energy Health and well-being Goods and services for aging populations Waste management Food stainability and availability Water conservation and accessibility Providing greater access to education Affordable housing and urban development Improving financial inclusion For Illustrative Purposes Only HNW INVESTORS STARTING TO TAKE ACTION: CLEAN ENERGY AND HEALTH INVESTMENTS, AS WELL AS POSITIVE AND NEGATIVE SCREENING, LEAD THE WAY Sizable shares of HNW investors report having taken, or plan to consider taking, a range of socially responsible and/or sustainable investment actions. In line with their expectations for financial returns above, investing in clean energy funds is most popular ( have taken this step or are considering it 43% 42% 65% 65% 63% 62% 0 20 40 60 80 100 in the next three years). Investing in healthcare-based funds () and those that focus broadly on positive social or environmental change (33%), as well as positive and negative screening (each ) follow closely behind. Divesting from fossil fuels (29%), community investing (28%) and aligning investments with one s religious beliefs (25%) are a little less attractive to HNW investors. Focusing specifically on the actions that HNW investors have actually 4 MORGAN STANLEY 2016
taken, investing in healthcare-based funds ranks first (17%), followed by negative screening (13%). In both cases, millionaires are more apt to have taken these steps (27% and 17%, respectively, vs. HNW investors overall). Millionaires are also more likely to have divested from fossil fuels (11%). Majorities of HNW Millennials are at least considering each step, save for aligning investments with their religious beliefs (44%). Positive screening (36%) and investing in funds that focus broadly on creating positive change () and in clean energy funds (33%) are the most common steps actually taken by HNW Millennials. Actions Taken or Considered In Next 3 Years Have Done Investing in heathcarebased funds 17% 18% Negative screening Investing in clean energy funds Are Considering Next 3 Years 13% 12% 22% 26% % Have done or are considering (net) Investing in clean energy funds is somewhat more popular than divesting from fossil fuels. Positive screening Investing in funds that create positive change 8% 9% 26% 25% 33% Divesting from fossil fuels 8% 22% 29% Community investing 6% 22% 28% Aligning investments with religious beliefs 6% 19% 0 5 10 15 20 25 30 25% For Illustrative Purposes Only 5 MORGAN STANLEY 2016
Methods The Morgan Stanley Investor Pulse Poll was conducted by GfK Public Affairs & Corporate Communications using the GfK KnowledgePanel. From December 3 to December 28, 2015, a random sample of approximately one thousand (1,003) respondents across the US were interviewed. In order to qualify for this study, respondents were required to have $100,000 or more in household liquid investable assets, be between the ages of 25 and 75 years old, and to be one of the primary decision makers in the household for financial decisions. Quotas were applied in order to obtain approximately one-third in each of the following categories: $100,000 to $499,000; $500,000 to $999,000; and $1 million or more in investable assets. Results were then weighted to age within each of these three asset classes using benchmarks from the Federal Government s Survey of Consumer Finances data. An oversample of approximately 200 adults ages 25-32 with $100,000 or more in investable assets was surveyed using a blend of samples from the GfK KnowledgePanel and other online panels. Respondents from this sample were weighted using benchmarks from the Federal Government s Survey of Consumer Finances data. 6 MORGAN STANLEY 2016
Contacts Morgan Stanley (NYSE: MS) is a leading global financial services firm providing investment banking, securities, investment management and wealth management services. With offices in more than 43 countries, the Firm s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com. WEALTH MANAGEMENT MARKETING MS. LAUREN BOYMAN Managing Director CMO of Wealth Management Marketing Morgan Stanley 212-296-3563 lauren.boyman@morganstanley.com GLOBAL SUSTAINABLE FINANCE MR. JAMIE MARTIN Vice President Global Sustainable Finance Morgan Stanley 212-296-5193 jamie.martin@morganstanley.com MARKETING RESEARCH MR. ANTHONY GUGLIELMUCCI Executive Director Marketing Research Morgan Stanley 914-225-5531 anthony.guglielmucci@morganstanley.com Poll commissioned by Morgan Stanley but independently conducted by GfK Public Affairs, December 2015. This material has been prepared for informational purposes only and does not provide individually tailored investment advice. It is not an offer to buy or sell, or a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy and has been prepared without consideration of an individual s investment objectives, risk tolerance or financial circumstances. It should not be assumed that any securities transactions or holdings discussed were or will prove to be profitable. The information and statistical data contained herein have been obtained from sources that are believed to be reliable but in no way are guaranteed by Morgan Stanley Smith Barney LLC as to accuracy or completeness. The strategies and/or investments discussed in this material may not be suitable for all investors. Morgan Stanley Wealth Management recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor s individual circumstances and objectives. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund or investment may differ materially from those reflected or contemplated in such forward-looking statements. Clients should carefully consider the investment objectives, risks, charges, and expenses of a fund or investment before investing. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies. International investing involves certain risks, such as currency fluctuations, economic instability and political developments. Asset Allocation does not assure a profit or protect against loss in declining financial markets. Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund before investing. To obtain a prospectus, contact your Financial Advisor or visit the fund company s website. The prospectus contains this and other information about the mutual fund. Read the prospectus carefully before investing. Morgan Stanley Smith Barney LLC and its affiliates and their employees (including Financial Advisors and Private Wealth Advisors) are not in the business of providing tax or legal advice. These materials and any statements contained herein should not be construed as tax or legal advice. Individuals should consult their personal tax advisor or attorney for matters involving taxation and tax planning and their attorney for matters involving personal trusts and estate planning. 2016 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 1416684 02/16 CS 8469635 04/16